Investing.com - Gold prices erased losses on Tuesday, after data showed that retail sales in the U.S. fell unexpectedly in June, while core sales also missed estimates, dampening optimism over the strength of the economy and dimming prospects for higher interest rates.
The U.S. Commerce Department said that retail sales declined by a seasonally adjusted 0.3% last month, disappointing expectations for a gain of 0.2% and following an increase of 1.0% in May.
Core retail sales, which exclude automobile sales, fell by a seasonally adjusted 0.1% in June, compared to forecasts for a 0.5% increase and after rising 0.8% in the preceding month.
The weak report fueled concerns over the health of the U.S. economy and dampened expectations for higher interest rates.
A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.
Wednesday’s testimony by Federal Reserve Chair Janet Yellen to the Senate Banking Committee will also be closely watched for any indication on when U.S. interest rates may start to rise.
Last week, Fed Chair Yellen said that the central bank is on track to raise interest rates at some point this year, but warned over weakness in the labor market.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 96.44, down 0.5% for the day.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange tacked on $1.10, or 0.1%, to trade at $1,156.50 a troy ounce during U.S. morning hours.
A day earlier, gold fell to $1,144.80, a level not seen since March 17, before closing at $1,155.40, down $2.50, or 0.22%. Futures were likely to find support at $1,142.40, the low from March 17, and resistance at $1,163.90, the high from July 13.
Gold prices have been under pressure in recent weeks amid indications that the U.S. economy is regaining strength after a recent bout of weakness, supporting the case for higher interest rates later this year.
Also on the Comex, silver futures for September delivery slumped 7.7 cents, or 0.5%, to trade at $15.37 a troy ounce. On Monday, silver declined 2.4 cents, or 0.16%, to end at $15.45.
Elsewhere in metals trading, copper for September delivery slipped 2.2 cents, or 0.85%, to trade at $2.523 a pound during morning hours in New York. Prices of the red metal slumped to a six-year low of $2.381 on July 8.
China is scheduled to release data on second-quarter gross domestic product on Wednesday. The report is expected to show the world's second largest economy grew 6.9%, slowing from 7.0% in the preceding quarter.
Beijing has set a growth target of "around 7.0%" in 2015 after the economy grew 7.4% in 2014, the slowest pace in 24 years.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Meanwhile, investors waited to see if the Greek parliament would support harsh austerity measures demanded by the country’s creditors in exchange for a deal to avoid financial collapse.
Greek Prime Minister Alexis Tsipras was to meet with MP's on Tuesday, but faced an uphill battle to win support for a third bailout deal offered by the country’s creditors.
Four pieces of legislation must be passed by the end of the day on Wednesday, including pension and sales tax reforms.